The London Steam-ship Owners Mutual Insurance Association Ltd v Spain and France (The Prestige Nos 3 & 4)

The Court of Appeal held that the English courts had no state immunity barriers to the Club's applications to appoint arbitrators and to commence proceedings, because the States' pursuit of the Spanish Art 117 claims was commercial in character and fell within the exceptions to immunity in the State Immunity Act 1978 (in particular s.3(1)(a)) and, in the case of the section 18 application, s.9 (arbitrations) applied by reason of the conditional-benefit principle. The court decided that the Arbitration Claims could proceed in England (domestic service rules applied because the arbitration exception in the Brussels Recast Regulation excluded those proceedings from the Regulation).

By contrast the Club's Award Claims (seeking damages or equitable compensation for alleged failure to "honour" declaratory arbitral awards) failed on the merits threshold for service out of the jurisdiction: a purely declaratory award does not create a fresh actionable obligation to "honour" it giving rise to damages or equitable compensation, so there was no serious issue to be tried and the English court lacked jurisdiction.

Finally, the Judgment Claims (claims based on the English s.66 judgments entered in the terms of the awards) were held to be "matters relating to insurance" within Section 3 of Chapter II of the Brussels Recast Regulation so jurisdiction for those claims lay in the courts of the defendants' domiciles and not in England. The Court therefore dismissed Spain's appeal against appointment of an arbitrator, allowed the States' appeal in respect of the Award Claims, and dismissed the Club's appeal in respect of the Judgment Claims.

The Prestige tanker sank in 2002, causing pollution losses to Spain and France. Spain and France obtained judgments in Spain against the Club for amounts within the Club's cover. The Club contended that the States had agreed to arbitrate disputes under the Club Rules and obtained declaratory arbitral awards (enforced as s.66 judgments) that the States were bound to arbitrate and that a "pay to be paid" clause limited Club liability. The Club brought three sets of new proceedings: (i) Arbitration Claims (new arbitrations seeking declarations, damages/equitable compensation and anti-suit relief and an application under s.18 to appoint arbitrators), (ii) Award Claims (court proceedings seeking damages/equitable compensation for alleged failure to honour the arbitral awards), and (iii) Judgment Claims (court proceedings seeking damages/equitable compensation for alleged breach of the s.66 judgments).

Procedural posture: appeals to the Court of Appeal from High Court decisions of Mr Justice Henshaw and Mr Justice Butcher ([2020] EWHC 1582 (Comm) and [2020] EWHC 1920 (Comm)). The States challenged jurisdiction and claimed state immunity; the Club cross-appealed on jurisdiction under the Recast Regulation.

Issues framed:

• Whether the States were entitled to state immunity from the Arbitration, Award and Judgment Claims (principally under the State Immunity Act 1978 s.3 and s.9).
• Which jurisdictional regime applied: the Brussels Recast Regulation or the domestic CPR rules, in particular whether the arbitration exception (Art 1.2(d)) excluded particular claims from the Regulation.
• Whether a purely declaratory arbitral award gives rise to an implied actionable obligation to "honour" the award and therefore supports damages/equitable compensation claims.

Court's reasoning and conclusions:

• The court found the States' pursuit of the Art 117 claims was commercial activity within s.3(3)(c) of the State Immunity Act and that the Award, Judgment and section 18 proceedings "related to" that commercial activity so immunity was displaced by s.3(1)(a). The conditional-benefit principle also meant s.9 removed immunity in respect of the Arbitration Claims and the section 18 application.
• Proceedings to appoint an arbitrator and to enable arbitration were within the arbitration exception in Art 1.2(d) of the Recast Regulation; domestic service rules therefore applied to the Arbitration Claims and Award Claims.
• The court held declaratory arbitral awards do not create new, enforceable obligations to "honour" such awards for which damages or equitable compensation can be claimed. The Award Claims therefore raised no serious issue to be tried for service out of the jurisdiction and jurisdiction was refused.
• The Judgment Claims were "matters relating to insurance" within Section 3 of Chapter II of the Recast Regulation and Article 14 required insurer-initiated claims to be brought only in the courts of the defendant's domicile; thus England lacked jurisdiction for the Judgment Claims.

Wider context: the judgment considered interaction among the State Immunity Act 1978, the Arbitration Act 1996, the Brussels Recast Regulation and human-rights based interpretative obligations (Benkharbouche). The court noted overlap between s.3 and s.9 and emphasised the arbitration exception's exclusion of arbitration from the Recast Regulation.

The Court of Appeal allowed in part the appeals. It dismissed Spain's appeal against the High Court's appointment of an arbitrator under section 18 of the Arbitration Act 1996 (Spain had no immunity from that application) and held that the Arbitration Claims may be pursued in England (domestic service rules apply because arbitration is excluded from the Recast Regulation). It allowed the States' appeal in respect of the Award Claims, concluding that a purely declaratory arbitral award does not create a standalone actionable obligation to 'honour' it and therefore there was no serious issue to be tried for service out of the jurisdiction. It dismissed the Club's appeal in respect of the Judgment Claims, holding those claims to be matters relating to insurance under Section 3 of Chapter II of the Brussels Recast Regulation such that jurisdiction lies in the defendants' domiciles (Article 14). The court's reasoning rested on the State Immunity Act 1978 exceptions (particularly s.3 and s.9), the arbitration exception in the Recast Regulation (Art 1.2(d)), the domestic threshold for service out (serious issue to be tried), and the autonomous meaning and exclusivity of the Recast Regulation's insurance regime (Section 3 / Article 14).

Appeal to the Court of Appeal from the High Court of Justice, Business and Property Courts, Commercial Court (QBD) (Mr Justice Henshaw and Mr Justice Butcher) decisions reported at [2020] EWHC 1582 (Comm) and [2020] EWHC 1920 (Comm). The dispute arises after prior arbitral Awards and enforcement/judicial proceedings, including The Prestige (No. 2) litigation up to [2015] EWCA Civ 333 and earlier High Court challenges to the arbitrator's jurisdiction ([2013] EWHC 3188 (Comm)). The Court of Appeal delivered the present judgment at [2021] EWCA Civ 1589.